bob chapman the financial system in america is on the edge of default 14 march 2010

7/28/2019 Bob Chapman the Financial System in America is on the Edge of Default 14 March 2010

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Bob Chapman The Financial System in America is on the Edge of Default 14 March 2010

By

Global Research,

The International Forecaster- 2010-03-13

The dramatic and costly undertow of deflation continues unabated, as government via fiscalpolicy and the Federal Reserve, by creating money and credit out of thin air, proceed tooverpower this deflation with massive inflation.Unbeknownst to most the Fed and the Treasury have been maintaining this program for the

past several years, accompanied by most major countries, all of which have taken the path ofleast resistance rather than address the underlying problems.The current stage of problems had to be addressed 2-1/2 years ago in what has become known

as a credit crisis. This continuing crisis has been accompanied by 22-1/8% currentunemployment that has resulted in a perpetual fall in tax revenues and a resultant enlargementof government deficits. We might add that this condition is being experienced by manycountries worldwide, which followed Americas leadership into this terrible financial andeconomic morass. These policies have led to massive sovereign debt policies, a hangover ofthe policies of 1933 and 1971.

The financial system in America is on the edge of default. A recent poll found that 92% ofthose surveyed wanted to unseat their current representative or Senator in Washington andonly 21% believed that government enjoyed the consent of the governed. Its very obvious

people are not happy with the political, economic and financial situation presently. Eightypercent believe that government is enmeshed in partisan infighting. Not only between parties,but within parties as well. Politicians are very aware of these numbers and are frantic to getreelected. The public has recoiled in disgust. People are demanding that the power ofgovernment be curbed. People are sick and tired of paid off corrupt politicians, more than halfof whom have been in office for more than ten years.It is not healthy for a nation to have $3.3 trillion in Treasury bonds held by foreigners. Chinaholds about $900 billion and Japan about $800 billion. We also understand that hedge fundsand others also are fronting both countries, so the figures are not really reflective in their total

positions. These nations for the most part are rolling their positions, but have not injected new

capital into US Treasuries. That is why the Fed had to fund 80% of new Treasury debt lastyear.Presently the Fed is fighting and pulling out all stops to halt legislation to audit the FederalReserve, a private corporation, which has managed our monetary policy since 1913, under theFederal Reserve Act. On Monday the Treasury held a media conference for financial reportersand bloggers in which the Fed was discussed. The meeting had some very strange conditions.Mr. Geithner, Mr. Krueger and Mr. Sperling could be paraphrased but not quoted and whatwas paraphrased could not be connected to a specific official. Again, the element of secrecy to

protect the guilty. One blogger said, Did they get the ground rules from Al Qaeda? Themeeting was a travesty. How can government officials demand secrecy in public briefings? It

is no wonder that 90% of the public and 317 members of Congress want more Treasurytransparency and an audit and investigation of the Fed. This is the same gang run by Geithnerand Bernanke that are currently running the gold suppression scheme. When you have a
http://www.globalresearch.ca/http://www.theinternationalforecaster.com/http://www.theinternationalforecaster.com/http://www.globalresearch.ca/


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criminal cabal involved you have no transparency. That is why the audit of the Fed is soimportant. Such an exercise would expose exactly what both have been doing in the markets.The Fed and Treasury have lied for years about what they have been up too in behalf of theirIlluminist friends. It is not only about the actions of the Presidents Working Group onFinancial Markets, but the funding of Watergate, Saddam Hussein, who they supposedly

conveniently hung, the countries that secretly received loans, how much, who got them andwhat was the collateral? Were currency swaps with foreign control banks used to strengthenthe dollar by the Fed and for those foreign control banks to purchase Treasury and Agency

paper? How about all the inside information funneled to Wall Street and banking for almost acentury from both the Fed and Treasury? Their lies are legion. They both are manipulatingevery market in the world 24/7 and the American people want it stopped. We also want anaudit of Americas gold and the testing of the gold bars held. There is much we want to know,so we can save our country and our freedom.Investors continue to chase yields, which is a dumb practice. Interest rates are at 80-year lowsand can only stay the same or rise. People are grabbing junk bond yields that will come back

to haunt them.At least for now Greece and euro problems are being shuffled into the background. You canimagine this is not the last of the eurozone problems. The PIIGS will be back one by one tocause never-ending problems until they are forced to leave the eurozone. That will cause aeurozone breakup, probably by the end of next year.

This is the first real threat to the eurozone since its beginning ten years ago, and we think theywill find that their rules are so restrictive that weak members will be forced to leave. Themonetary policy and interest rates may be singular, but fiscal policy is not. Exchange rates forthe euro must fit all members, but rates and methods of growth vary widely. With onecurrency sovereignty has effectively been lost. Public debt to GDP has to be under 3%, whilemost are over 3%: Greece is at 10.7%. There is also a public debt limit of 60% of GDP, whichall nations in the zone have broken. All precepts have not and cannot be met. There is noeffective policy because there is no way to enforce the rules. In addition most have currentaccount deficits and the zone effectively has been carried by Germany from this aspect. The

bottom line is a few have growth, the rest do not. As a result there is pressure, due to poorgrowth in some of the nations, for austerity measures to reduce fiscal deficits at the worst

possible time. Greece comes first along with Ireland and the rest will follow.Just as an example, Spain has a fiscal deficit of 10% of GDP that has to fall to 3% within

three years, which is virtually impossible just as it is in Greece. Their current account deficitis 4.5% of GDP. In a recessionary/depressionary world getting into the plus column is a tallorder. This dilemma is the result in part of the housing collapse caused by Spanish banks andinattention by the Bank for International Settlements. We see consumption continuing to fallin the face of 20% unemployment, which worsens by the day. The PIIGS and a present totalof 19 nations are effectively bankrupt. We do not believe they can survive without devaluationand debt default. That is why we expect that to happen next year.

Historically banks have kept loan loss allowance ratios at $1.33 for every dollar of debt.Today it is 0.58%.

The commercial paper market rose $11.2 billion last week to $1.145 trillion.


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The Treasury sold $21 billion in 10-year T-notes. The bid-to-cover was 3.45 to 1, which isaverage vs. 2.85 to 1. This was the highest since 1995. Indirect bidders, which include foreigncentral banks, bought 35.1%, compared to an average of 41.7% at the last four re-openings.Almost 39 million Americans received food stamps in December, the most ever, as the jobless

rate hovered near a 26- year high, the government said.Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statementon its Web site. The number receiving the benefit has set records for 13 straight months.Food aid climbed as the national unemployment rate reached 10.1 percent in October, thehighest since June 1983, and remained at 10 percent through December before easing to 9.7

percent in January.An average of 40.5 million people will get food stamps each month in the federal fiscal year

that began Oct. 1, Agriculture Secretary Tom Vilsack said last week. The figure is projected torise to 43.3 million in 2011.

Nevada had the biggest increase in the percentage of the population receiving the coupons, up49 percent from December, USDA figures show. Texas had the most recipients, at 3.31million, topping Californias 3.11 million.The U.S. government recorded a budget deficit of $221 billion in February, the TreasuryDepartment reported Wednesday, even as its income posted a big increase for the month.Income totaled $107.5 billion in February, a 23% increase over last February's total, andmarking the first monthly year-over-year increase since April 2008.Spending was $328 billion in February, up 17% year over year. That was the largest Februarytotal on record, a Treasury official said.February was the 17th consecutive month that the government recorded a deficit. It was alittle less than expected: last week the Congressional Budget Office predicted that the deficitwould be $223 billion in February.Year to date, the deficit is $652 billion, according to the Treasury data.

The Senate approved a $140 billion package of tax breaks and aid to the unemployedWednesday, the most substantial effort by the chamber to boost the nation's economy since

passing the stimulus bill last year.Six Republicans joined 56 Democrats to pass the "tax extenders" measure, 62 to 36. The

package faces an uncertain future in the House, where Democrats have taken a markedlydifferent approach to the "jobs agenda" than have their Senate colleagues.Small defense companies, energy firms, and other technology start-ups throughout NewEngland could lose tens of millions of dollars a year because of a decision by House

Democrats yesterday to abruptly halt budget earmarks for companies.


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The decision follows a House ethics probe into an alleged pay-to-play system in whichinvestigators followed a trail of campaign contributions and linked them to earmarks a

provision added to a bill that directs money to a specific project, in this case, a privatecompany. Although the House Ethics Committee cleared members of specific wrongdoing,House leaders remained sensitive to the appearance of a rampant quid-pro-quo system that has

stoked outrage around the country.The decision, which exempts earmarks for nonprofit groups, could significantly affectMassachusetts because the House delegation has proved adept at the political horse-tradingrequired to obtain funding for private companies.Can Nancy Pelosi Get the Votes?The Senate bill's abortion language is not the House Speaker's only problem.http://online.wsj.com/article/SB10001424052748703701004575113292688090292.html#print

Mode

*****SEVEN HOUSE members, including Northern Virginia Rep. James P. Moran Jr. (D),collected more than $840,000 inpolitical contributions from employees and clients of alobbying firm, Paul Magliocchetti and Associates Group (PMA), during a two-year span. Inthat same period, the lawmakers, strategically situated on the Appropriations defensesubcommittee, directed more than $245 million in earmarks to clients of PMA.If you think those two facts are unrelated, you are qualified to be on the House ethicscommittee. The panel recently found that "simply because a member sponsors an earmark foran entity that also happens to be a campaign contributor does not, on these two facts alone,support a claim that a member's actions are being influenced by campaign contributions."The ethics committee acknowledged that "there is a widespread perception amongcorporations and lobbyists that campaign contributions provide enhanced access to membersor a greater chance of obtaining earmarks." Gee, how could anyone have gotten thatimpression? Maybe because the lawmakers targeted those seeking earmarks for campaigncontributions? Sent their key appropriations staffers to fundraisers?

For instance, in 2008, the appropriations director for Rep. Pete Visclosky (D-Ind.) toldcorporations interested in obtaining earmarks that they needed to submit requests by Feb. 15.On Feb. 27, Mr. Visclosky's campaign manager sent a letter to companies that had sought hishelp on defense matters inviting them to a fundraiser on March 12. Mr. Visclosky's politicalcommittees received $35,300 from clients of PMA that month, plus another $12,000 from thelobbying firm and its employees. A week after the fundraiser, which was focused on defensecontractors and attended by his chief of staff and appropriations director, Mr. Viscloskyrequested earmarks for six PMA clients, totaling more than $14 million.House leaders understand that voters may not be quite as obtuse as the ethics committeeseems to assume, and their extreme embarrassment -- over this and other scandals -- may lead

to useful action. The House is right to ban lawmakers from earmarking government funds forfor-profit companies. It should go further, and extend the prohibition to nonprofit andeducational institutions as well. Some nonprofit institutions spend enormous sums on
http://online.wsj.com/article/SB10001424052748703701004575113292688090292.html#printModehttp://online.wsj.com/article/SB10001424052748703701004575113292688090292.html#printModehttp://www.washingtonpost.com/wp-dyn/content/article/2010/03/06/AR2010030602374.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/03/06/AR2010030602374.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/02/26/AR2010022602864.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/02/26/AR2010022602864.htmlhttp://online.wsj.com/article/SB10001424052748703701004575113292688090292.html#printModehttp://online.wsj.com/article/SB10001424052748703701004575113292688090292.html#printModehttp://www.washingtonpost.com/wp-dyn/content/article/2010/03/06/AR2010030602374.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/03/06/AR2010030602374.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/02/26/AR2010022602864.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/02/26/AR2010022602864.html


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lobbyists, who dispense campaign donations in hope of obtaining earmarks. More important,the Senate must follow suit, as much as it appears disinclined to do so. A system that alignscampaign cash and earmarks is inherently unseemly, if not outright corrupt, and the Senate istainted by this setup as well.

We say this fully aware that the Constitution grants Congress the power of the purse and thatearmarks are not close to the biggest reason for out-of-control spending. And that lawmakershave taken steps in recent years to reduce the number of earmarks and make the process moreopen. And that eliminating earmarks would not end every instance in which private interestslobby for -- and make campaign contributions in hope of obtaining -- particular favors.It would, however, eliminate the worst such abuse. The House Ethics Manual cautionsmembers "to avoid even the appearance that solicitations of campaign contributions areconnected in any way with an action taken or to be taken in an official capacity." The ethicscommittee, dismissing that caution and a recommendation by the newly created independentOffice of Congressional Ethics to investigate two of the seven representatives, decided there

was nothing to worry about in the PMA case. With standards this lax, the only reasonablechoice is to end the earmarks that fuel this sleazy process. [This dramatically shows you whycampaign contributions have to end.]The dramatic and costly undertow of deflation continues unabated, as government via fiscal

policy and the Federal Reserve, by creating money and credit out of thin air, proceed tooverpower this deflation with massive inflation.Unbeknownst to most the Fed and the Treasury have been maintaining this program for the

past several years, accompanied by most major countries, all of which have taken the path ofleast resistance rather than address the underlying problems.The current stage of problems had to be addressed 2-1/2 years ago in what has become knownas a credit crisis. This continuing crisis has been accompanied by 22-1/8% currentunemployment that has resulted in a perpetual fall in tax revenues and a resultant enlargementof government deficits. We might add that this condition is being experienced by manycountries worldwide, which followed Americas leadership into this terrible financial andeconomic morass. These policies have led to massive sovereign debt policies, a hangover ofthe policies of 1933 and 1971.

The financial system in America is on the edge of default. A recent poll found that 92% of

those surveyed wanted to unseat their current representative or Senator in Washington andonly 21% believed that government enjoyed the consent of the governed. Its very obviouspeople are not happy with the political, economic and financial situation presently. Eightypercent believe that government is enmeshed in partisan infighting. Not only between parties,but within parties as well. Politicians are very aware of these numbers and are frantic to getreelected. The public has recoiled in disgust. People are demanding that the power ofgovernment be curbed. People are sick and tired of paid off corrupt politicians, more than halfof whom have been in office for more than ten years.It is not healthy for a nation to have $3.3 trillion in Treasury bonds held by foreigners. Chinaholds about $900 billion and Japan about $800 billion. We also understand that hedge funds

and others also are fronting both countries, so the figures are not really reflective in their totalpositions. These nations for the most part are rolling their positions, but have not injected new
http://oce.house.gov/http://oce.house.gov/


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capital into US Treasuries. That is why the Fed had to fund 80% of new Treasury debt lastyear.Presently the Fed is fighting and pulling out all stops to halt legislation to audit the FederalReserve, a private corporation, which has managed our monetary policy since 1913, under the

Federal Reserve Act. On Monday the Treasury held a media conference for financial reportersand bloggers in which the Fed was discussed. The meeting had some very strange conditions.Mr. Geithner, Mr. Krueger and Mr. Sperling could be paraphrased but not quoted and whatwas paraphrased could not be connected to a specific official. Again, the element of secrecy to

protect the guilty. One blogger said, Did they get the ground rules from Al Qaeda? Themeeting was a travesty. How can government officials demand secrecy in public briefings? Itis no wonder that 90% of the public and 317 members of Congress want more Treasurytransparency and an audit and investigation of the Fed. This is the same gang run by Geithnerand Bernanke that are currently running the gold suppression scheme. When you have acriminal cabal involved you have no transparency. That is why the audit of the Fed is soimportant. Such an exercise would expose exactly what both have been doing in the markets.

The Fed and Treasury have lied for years about what they have been up too in behalf of theirIlluminist friends. It is not only about the actions of the Presidents Working Group onFinancial Markets, but the funding of Watergate, Saddam Hussein, who they supposedlyconveniently hung, the countries that secretly received loans, how much, who got them andwhat was the collateral? Were currency swaps with foreign control banks used to strengthenthe dollar by the Fed and for those foreign control banks to purchase Treasury and Agency

paper? How about all the inside information funneled to Wall Street and banking for almost acentury from both the Fed and Treasury? Their lies are legion. They both are manipulatingevery market in the world 24/7 and the American people want it stopped. We also want anaudit of Americas gold and the testing of the gold bars held. There is much we want to know,so we can save our country and our freedom.Investors continue to chase yields, which is a dumb practice. Interest rates are at 80-year lowsand can only stay the same or rise. People are grabbing junk bond yields that will come backto haunt them.At least for now Greece and euro problems are being shuffled into the background. You canimagine this is not the last of the eurozone problems. The PIIGS will be back one by one tocause never-ending problems until they are forced to leave the eurozone. That will cause aeurozone breakup, probably by the end of next year.

This is the first real threat to the eurozone since its beginning ten years ago, and we think theywill find that their rules are so restrictive that weak members will be forced to leave. Themonetary policy and interest rates may be singular, but fiscal policy is not. Exchange rates forthe euro must fit all members, but rates and methods of growth vary widely. With onecurrency sovereignty has effectively been lost. Public debt to GDP has to be under 3%, whilemost are over 3%: Greece is at 10.7%. There is also a public debt limit of 60% of GDP, whichall nations in the zone have broken. All precepts have not and cannot be met. There is noeffective policy because there is no way to enforce the rules. In addition most have currentaccount deficits and the zone effectively has been carried by Germany from this aspect. The

bottom line is a few have growth, the rest do not. As a result there is pressure, due to poorgrowth in some of the nations, for austerity measures to reduce fiscal deficits at the worst

possible time. Greece comes first along with Ireland and the rest will follow.


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Just as an example, Spain has a fiscal deficit of 10% of GDP that has to fall to 3% withinthree years, which is virtually impossible just as it is in Greece. Their current account deficitis 4.5% of GDP. In a recessionary/depressionary world getting into the plus column is a tallorder. This dilemma is the result in part of the housing collapse caused by Spanish banks andinattention by the Bank for International Settlements. We see consumption continuing to fall

in the face of 20% unemployment, which worsens by the day. The PIIGS and a present totalof 19 nations are effectively bankrupt. We do not believe they can survive without devaluationand debt default. That is why we expect that to happen next year.

Historically banks have kept loan loss allowance ratios at $1.33 for every dollar of debt.Today it is 0.58%.The commercial paper market rose $11.2 billion last week to $1.145 trillion.The Treasury sold $21 billion in 10-year T-notes. The bid-to-cover was 3.45 to 1, which isaverage vs. 2.85 to 1. This was the highest since 1995. Indirect bidders, which include foreign

central banks, bought 35.1%, compared to an average of 41.7% at the last four re-openings.Almost 39 million Americans received food stamps in December, the most ever, as the joblessrate hovered near a 26- year high, the government said.Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statementon its Web site. The number receiving the benefit has set records for 13 straight months.Food aid climbed as the national unemployment rate reached 10.1 percent in October, thehighest since June 1983, and remained at 10 percent through December before easing to 9.7

percent in January.An average of 40.5 million people will get food stamps each month in the federal fiscal yearthat began Oct. 1, Agriculture Secretary Tom Vilsack said last week. The figure is projected torise to 43.3 million in 2011.

Nevada had the biggest increase in the percentage of the population receiving the coupons, up49 percent from December, USDA figures show. Texas had the most recipients, at 3.31million, topping Californias 3.11 million.

The U.S. government recorded a budget deficit of $221 billion in February, the TreasuryDepartment reported Wednesday, even as its income posted a big increase for the month.Income totaled $107.5 billion in February, a 23% increase over last February's total, andmarking the first monthly year-over-year increase since April 2008.Spending was $328 billion in February, up 17% year over year. That was the largest Februarytotal on record, a Treasury official said.February was the 17th consecutive month that the government recorded a deficit. It was alittle less than expected: last week the Congressional Budget Office predicted that the deficit

would be $223 billion in February.Year to date, the deficit is $652 billion, according to the Treasury data.


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The Senate approved a $140 billion package of tax breaks and aid to the unemployedWednesday, the most substantial effort by the chamber to boost the nation's economy since

passing the stimulus bill last year.

Six Republicans joined 56 Democrats to pass the "tax extenders" measure, 62 to 36. Thepackage faces an uncertain future in the House, where Democrats have taken a markedlydifferent approach to the "jobs agenda" than have their Senate colleagues.Small defense companies, energy firms, and other technology start-ups throughout NewEngland could lose tens of millions of dollars a year because of a decision by HouseDemocrats yesterday to abruptly halt budget earmarks for companies.The decision follows a House ethics probe into an alleged pay-to-play system in whichinvestigators followed a trail of campaign contributions and linked them to earmarks a

provision added to a bill that directs money to a specific project, in this case, a private

company. Although the House Ethics Committee cleared members of specific wrongdoing,House leaders remained sensitive to the appearance of a rampant quid-pro-quo system that hasstoked outrage around the country.The decision, which exempts earmarks for nonprofit groups, could significantly affectMassachusetts because the House delegation has proved adept at the political horse-tradingrequired to obtain funding for private companies.http://www.manpower.com/investors/releasedetail.cfm?releaseid=450330Though 73% of firms surveyed said they plan on hiring NO employees and 8% intend to fireemployees, Manpower is trying to spin the survey as a sign of an improving employment

picture. But under multiple extensions enacted by the federal government in response to thedownturn, workers can collect the payments for as long as 99 weeks in states with the highestunemployment rates -- the longest period since the program's inception.But complaints that extending unemployment payments discourages job-seeking have begunto bubble into the political debate. "If anything, continuing to pay people unemploymentcompensation is a disincentive for them to seek new work," Kyl said. "I am sure most of themwould like work and probably have tried to seek it, but you can't argue it is a job enhancer."

Shopping blues: Top tax 12%. Chicago's 10.25% highest big-city rate. More Internet taxfights loom. But Vertex Inc., which calculates sales tax for Internet sellers, reports that theaverage general sales tax rate nationwide reached 8.629% at the end of 2009, the highest sincethe Berwyn, Pa., company started tracking data in 1982. That was up a nickel on a taxable$100 purchase from a year earlier and up nearly 40 cents for the decade.http://finance.yahoo.com/taxes/article/109012/us-sales-tax-rates-hit-record-highThe number of Americans filing first-time claims for jobless benefits fell for a second week toa level that indicates companies are nearing the end of payroll reductions as the economyrecovers.

First-time jobless applications dropped by 6,000 to 462,000 in the week ended March 6,Labor Department figures showed today in Washington. The number of people receivingunemployment insurance increased, while those getting extended benefits fell.
http://www.manpower.com/investors/releasedetail.cfm?releaseid=450330http://finance.yahoo.com/taxes/article/109012/us-sales-tax-rates-hit-record-highhttp://www.manpower.com/investors/releasedetail.cfm?releaseid=450330http://finance.yahoo.com/taxes/article/109012/us-sales-tax-rates-hit-record-high


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The labor market in the United States remains fragile with the initial jobless claims decliningless than expected and continuing claims increasing against expectations.From the previous revised data of 468,000. 4-week average was 475,500, 5,000 claims morethan previous week average of 470,500.

Continuing claims has been posted as increased of 37,000 in the week of February 27 to4,558,000 from previous revised data of 4,521,000. Expectations were a decline to 4,500,000Unemployment tops 20% in eight California counties. The state's jobless rate of 12.5% inJanuary was its worst on record and fifth-highest in the nation.For many California areas, unemployment rates moved persistently higher in January,indicating that the national economic recovery hasn't yet translated into jobs for the GoldenState.

New county-by-county figures released by the state Wednesday showed that in eight counties,more than 1 in 5 people were out of work. Moreover, revised numbers for last year show thatfewer people were employed than was previously believed.The state was one of five, along with Florida, Georgia, North Carolina and South Carolina,that reached their highest unemployment rates since the government began keeping track in1976, according to the Bureau of Labor Statistics. California's was 12.5% in January, up from12.3% in December."The unemployment rate will be persistently at this high level for at least a few more months,"said Esmael Adibi, an economist at Chapman University in Orange.The unemployment rate for the Riverside-San Bernardino-Ontario metro area reached 15% inJanuary, its highest since 1990, the earliest year for which the state has comparable dataavailable. Unemployment in Orange County reached 10.1%, up from 9.1% in December.The state's revised data for last year showing elevated unemployment indicate that a recoverycould take longer than previously predicted."The impact on the labor market was much more severe than what we had estimated," Adibisaid. Most counties were still struggling under the burden of joblessness, especially the eightcounties where rates were higher than 20%. Merced County, for instance, had an

unemployment rate of 21.7% in January, and Imperial County's rate was 27.3%.The national unemployment rate in January was 9.7%, and the country experienced a strong5.75% annualized increase in gross domestic product in last year's final three months."The real mystery now is why we aren't getting job growth when the GDP has been positive,"said Stephen Levy, director of the Center for Continuing Study of the California Economy.Budget problems in state and local government are expected to further drag down the state'srecovery, Levy said. Even if they don't get pink slips, state employees are earning less money

because of furloughs and salary reductions, which reduces consumer spending in the state.

The government sector, which includes public education, lost 4,500 jobs from December toJanuary. Nancy Hack lost her job as a gardener with the Los Angeles Department of


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Recreation and Parks a year ago, and said that finding work has been a challenge at her age,54."I'm like a fish out of water," she said.

Los Angeles County, with an unemployment rate of 12.5%, was hard hit by declines in thetrade, transportation and utilities sector, which shed 21,900 jobs, and professional and

business services, which lost 16,300 jobs.The same sectors were hit in the Inland Empire, losing 7,700 and 3,600 jobs, respectively.Orange County lost 5,700 jobs in trade, transportation and utilities and 3,000 in professionaland business services.San Diego County's unemployment rate reached 11% in January, up from a revised 10.3% inDecember. The unemployment rate in Ventura County was 11.6% in January, up from arevised 10.9% in December.

California's unemployment rate was the fifth-highest in the nation, behind Michigan, Nevada,Rhode Island and South Carolina.The foreclosure crisis in the U.S. isn't over, but the pace of growth may finally be slowingdown.RealtyTrac Inc. said Thursday that the number of households facing foreclosure in Februarygrew 6 percent from a year ago, the smallest annual increase in four years. On the state level,foreclosures declined on a monthly and yearly basis in the hard-hit states of Nevada, Arizonaand California, but still grew rapidly in Florida.More than 308,000 U.S. households, or one in every 418 homes, received a foreclosure-related notice, the Irvine, California-based foreclosure listings company reported. That wasdown more than 2 percent from JanuaryStill, fears remain about the hundreds of thousands of homeowners who are still beingevaluated for help under loan modification programs. Many analysts say most of those

borrowers will eventually lose their homes, sparking a new round of foreclosures later thisyear.

"It's premature to declare victory just yet," said Rick Sharga, a RealtyTrac senior vicepresident. He did, however, allow that, "If this is the beginning of a slowdown in growth rates,that would be a good thing."Banks repossessed nearly 79,000 homes last month, down 10 percent from January but still up6 percent from February 2009.The RealtyTrac report follows an encouraging report last month from the Mortgage BankersAssociation. It said the percentage of borrowers who had missed just one payment on theirhome loans fell to 3.6 percent in the October to December quarter, down from 3.8 percent inthe third quarter.


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While that was a surprising piece of positive news, foreclosures were still at record highlevels. The number of borrowers who have either missed a payment or are in foreclosure wasat 15 percent.A record 2.8 million households were threatened with foreclosure last year, RealtyTrac said,

and the number is expected to rise to more than 3 million homes this year.The foreclosure crisis forced the federal government and several states to come up with plansto prolong the process so delinquent borrowers can try to find help. But those efforts have

barely dented the problem. Case in point: The Obama administration's $75 billion foreclosureprevention program has helped only 116,300 homeowners in the past year.After a year of trying to enroll homeowners in the Obama administration's program, housingcounselors are feeling deflated.At many of the 100 mortgage companies charged with running the program, employees still

"don't really know what the guidelines are -- or refuse to adhere" to them, said Cheryl Cassell,manager of housing counseling at the National Community Reinvestment Coalition, acommunity group in Washington.Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding

properties. Cities lose property tax dollars from homes that sit empty and lower propertyvalues.Economic woes, such as unemployment or reduced income, are expected to be the maincatalysts for foreclosures this year. Initially, lax lending standards were the culprit, buthomeowners with good credit who took out conventional, fixed-rate loans are the fastestgrowing group of foreclosures.Among states, Nevada posted the highest foreclosure rate, though foreclosures there weredown 7 percent from January and down more than 30 percent from a year earlier. It wasfollowed by Arizona, Florida, California and Michigan.The metro area with the highest foreclosure rate in February was Las Vegas.Apartment vacancies in the U.S., which reached a record high of 7.4 percent in 2009, will fallthis year as job losses stabilize and fewer new rental homes enter the market, CB Richard

Ellis Group Inc. said.

The vacancy rate will decline to 6.8 percent in 2010, the property broker said in a reporttoday. Effective rents, or what tenants pay after concessions, will end the year less than 1

percent down from the fourth quarter of 2009. Rents fell 4.7 percent in the final quarter of lastyear from a year earlier.

Apartments could fill up quickly as employers start hiring again and Americans in their 20sand early 30s give up sharing housing with roommates and parents, Bryce Blair, chiefexecutive officer of apartment developer AvalonBay Communities Inc., said in an interviewlast month. Builders will have to ramp up rapidly to meet demand after cutting apartment

starts by 58 percent last year.


12/19

Were seeing some stabilization in fundamentals for apartments as we do in the broadereconomy, said CB Richard Ellis Senior Economist Gleb Nechayev, who expects job growthin the third quarter. This gives us reason to be cautiously optimistic.

Manhattan, Boston, Washington D.C., Denver, and Seattle are among the markets where rents

will rise, Nechayev said.

In Boston, monthly rates will climb 2.8 percent in the fourth quarter of 2010 compared with ayear earlier. Rents will increase about 1 percent in Washington and Seattle and 2 percent inDenver, he said.

The trade deficit in the U.S. unexpectedly narrowed in January as imports fell for the firsttime in five months, indicating demand is cooling following the fastest pace of growth in sixyears.

The gap shrank 6.6 percent to $37.3 billion from $39.9 billion in December as refineries

imported the fewest barrels of crude oil in a decade, Commerce Department figures showedtoday in Washington. Exports decreased for the first time in nine months, on fewer shipmentsof aircraft and autos.

The somewhat disappointing trade data seem likely to prove a brief pause in a generallyimproving trend, said David Resler, chief economist at Nomura Securities International Inc.in New York. Trade flows are notoriously volatile from month- to-month, but declines in

both exports and imports are hardly signs of economic vitality.

After advancing at a 5.9 percent annual pace last quarter, the worlds largest economy mayexpand at less than half that pace in the first half of 2010, reflecting smaller gains in businessinvestment and exports, according to economists surveyed this month by Bloomberg News.Another report showed fewer Americans filed claims for jobless benefits, pointing to agradual recovery in the labor market.

The city's major hospital network, which runs Miami's only round-the-clock trauma centerand is a safety net for the poor and uninsured, is running out of money and could close, a

predicament that illustrates the precarious financial state of many hospitals around thecountry.The Jackson Health System will have little cash on hand by the end of March if it does not

receive a $67 million advance from the county, said Marcos Lapciuc, treasurer of the PublicHealth Trust, the institution's governing board."We are very close, if not already in, a health care death spiral," Chief Operating OfficerDavid Small said.Jackson could run out of cash and shut by May or sooner, Lapciuc said, and the county mayorsaid officials were preparing to advance the hospital some money."Sadly, it's not all that unique," Larry S. Gage, president of the National Association of PublicHospitals & Health System, said of financial difficulties like the one Jackson is facing.

US debt grew at the slowest pace on record during the fourth quarter, as households and

businesses continued to deleverage, nearly offsetting another huge increase in federal debt,


13/19

according to the quarterly flow of funds report released Thursday by the Federal Reserve.With businesses cutting their outstanding debt the most since 1991, nonfinancial debtsincreased at a 1.6% annual rate to $34.7 trillion at the end of the quarter, the smallest increasesince the Fed began tracking the data in 1952. Meanwhile, household net wealth increased by$683 billion to $54.2 trillion, a 5.1% annual increase, the Fed said. [What they fail to tell you

is that these figures are low because banks were writing off debt against the increase in debtgrowth.]US households increased their holdings of Treasury securities to the highest level in at leasttwo years, according to data released by the Federal Reserve on Thursday. Households held$795.2 billion in Treasuries at the end of the fourth quarter of 2009, up from $735.5 billion inthe third quarter, as Americans continued to find U.S. debt an attractive investment amidcontinued uncertainty over the strength of the U.S. economic rebound and sovereign-debt

problems abroad. That's the highest level of holdings in any quarter since at least thebeginning of 2008, according to the flow of funds data. The Fed's household and nonprofitcorporations sector include domestic hedge funds. [It is absolute fantasy to believe that

American households purchased these securities. This is how the Fed is hiding their purchasesof US Treasuries.]State banking regulators on Thursday evening shut down the troubled LibertyPointe Bank,whose chairman, Shaya Boymelgreen, built more than 2,400 apartments in New York City inthe last decade. The failure was the 27th in the nation this year but the first in the city in morethan a decade, regulators said.LibertyPointe, which had one branch in Manhattan and two in Brooklyn, had been strugglingunder the weight of bad real estate loans for many months. In mid-July, federal regulatorsordered the bank to stop lending to developers and to raise cash.But time ran out for LibertyPointe on Thursday. State regulators seized the bank and turned itover to the Federal Deposit Insurance Corporation, which struck a deal with Valley NationalBank. Valley National will assume LibertyPointes deposits, which totaled about $210million, and about one-tenth of its outstanding loans.Valley National, which is based in Wayne, N.J., agreed to share losses on the rest ofLibertyPointes loan portfolio with the F.D.I.C., regulators said. The F.D.I.C. estimated thatthe rescue would cost its insurance fund $24.8 million.

Gerald H. Lipkin, the chairman and chief executive of Valley National, said in a statement thatthe three branches would reopen Friday morning as part of Valley Nationals 201-branchnetwork. LibertyPointes depositors will be treated as customers of Valley National. Our

primary focus is to assure customers that their deposits are safe and remain readily accessibleto them, Mr. Lipkin said.The recession has caused a wave of bank failures across the country, but only one bank failedin New York State in the last five years. The State Banking Department closed WaterfordVillage Bank, based in Williamsville, near Buffalo, in July. The last failure of a New YorkCity-based bank occurred in December 1999, when regulators closed Golden CityCommercial Bank, a small bank that had an office in Flushing, Queens, and one on Lower

Broadway in Manhattan.
http://www.libertypointebank.com/http://www.libertypointebank.com/http://www.nytimes.com/2009/12/02/nyregion/02developer.htmlhttp://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_deposit_insurance_corp/index.html?inline=nyt-orghttp://www.valleynationalbank.com/http://www.valleynationalbank.com/http://www.valleynationalbank.com/http://www.libertypointebank.com/http://www.nytimes.com/2009/12/02/nyregion/02developer.htmlhttp://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_deposit_insurance_corp/index.html?inline=nyt-orghttp://www.valleynationalbank.com/http://www.valleynationalbank.com/


14/19

JPMorgan Chase & Co. and Citigroup Inc.helped cause the collapse ofLehman BrothersHolding Inc. by demanding more collateral and changing guarantee agreements, a bankruptcyexaminer said today in a report.The demands for collateral by Lehmans lenders had direct impact on Lehmans liquidity

pool, said Anton Valukas, the U.S. Trustee-appointed examiner, in a 2,200-page report filedin Manhattan federal court. Lehmans available liquidity is central to the question of whyLehman failed.Former Lehman Chief Executive OfficerRichard Fuld, former Chief Financial OfficerErinCallan, former executive vice president Ian Lowitt and former managing directorChristopherOMearacertified misleading statements, the report said. Fuld was at least grosslynegligent, the report said. Lehman collapsed in September 2008 with $639 billion in assets,the biggest bankruptcy in U.S. history.Commenting on Barclays Plcs purchase of Lehmans North American brokerage, Valukas

said a limited amount of assets belonging to Lehman were improperly transferred toBarclays.Kerrie Cohen, a Barclays spokeswoman in New York, and JPMorgan spokesman BrianMarchiony declined to comment. Citigroup spokeswoman Danielle Romero-Apsilos didnthave an immediate comment. Lowitt, who is now at Barclays, didnt immediately repond toan e-mail seeking comment. Barclays is Britains second-biggest bank. Citigroup is the third

biggest U.S. bank, and JPMorgan is second.Ezra Levy, a former hedge fund trader and former chief financial officer of Boston ProvidentPartners LP, pleaded guilty to federal charges he stole about $3 million from the Manhattan-

based firm.Levy, who was arrested in November, pleaded guilty to two schemes to defraud BostonProvident.In federal court yesterday, Levy admitted he transferred $2.45 million from Boston Providentto his own account. He also said he had the fund buy shares of Atlas Energy Inc. and anotherstock at inflated prices from an account he controlled, generating a $537,000 profit.I used the funds to pay my personal expenses, Levy, 32, told US District Judge Kevin

Castel.Boston Provident fired Levy after learning of the scheme.Levy joined Kramer Spellman LP, which changed its name to Boston Provident in 2004, as ananalyst in 2001.Before that, he worked for Prudential Securities and SG Cowen after starting out as anaccountant in a textiles firm.Under federal sentencing guidelines, Levy, who is free on bail, faces between 63 and 78

months in prison when he is sentenced for securities fraud and wire fraud.
http://www.bloomberg.com/apps/quote?ticker=JPM%3AUShttp://www.bloomberg.com/apps/quote?ticker=C%3AUShttp://www.bloomberg.com/apps/quote?ticker=C%3AUShttp://www.bloomberg.com/apps/quote?ticker=LEHMQ%3AUShttp://www.bloomberg.com/apps/quote?ticker=LEHMQ%3AUShttp://search.bloomberg.com/search?q=Anton+Valukas&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Richard+Fuld&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Richard+Fuld&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Erin+Callan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Erin+Callan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Erin+Callan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Ian+Lowitt&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher%0AO%3FMeara&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher%0AO%3FMeara&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher%0AO%3FMeara&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Kerrie+Cohen&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Brian+Marchiony&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Brian+Marchiony&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Danielle+Romero-Apsilos&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://www.bloomberg.com/apps/quote?ticker=JPM%3AUShttp://www.bloomberg.com/apps/quote?ticker=C%3AUShttp://www.bloomberg.com/apps/quote?ticker=LEHMQ%3AUShttp://www.bloomberg.com/apps/quote?ticker=LEHMQ%3AUShttp://search.bloomberg.com/search?q=Anton+Valukas&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Richard+Fuld&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Erin+Callan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Erin+Callan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Ian+Lowitt&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher%0AO%3FMeara&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher%0AO%3FMeara&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Kerrie+Cohen&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Brian+Marchiony&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Brian+Marchiony&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Danielle+Romero-Apsilos&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1


15/19

Sales at U.S. retailers unexpectedly climbed in February as shoppers braved blizzards to get tothe malls, signaling consumers will contribute more to economic growth.

Purchases increased 0.3 percent, the fourth gain in the past five months, CommerceDepartment figures showed today in Washington. Figures for the prior two months were

revised down, taking some of the shine off of todays data. Sales excluding autos rose 0.8percent, exceeding all estimates.

A report last week showing the economy lost fewer jobs than anticipated in February signaledemployment is on the verge of accelerating, a development that would spur spending incoming months. Macys Inc. was among retailers that beat estimates last month as customersovercame the weather to shop for Valentines Day gifts and spring merchandise, a sign theexpansion is broadening beyond manufacturing.

The storms were apparently not quite as disruptive as anticipated, said Adam York, aneconomist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for a

0.6 percent gain excluding autos was the highest of those surveyed. As we start adding jobsin the spring, employees will gain income and hours and retail sales should follow. [Thesenumbers are impossible. Washington still doesnt get it. We know they are fudging thefigures]The housing market is facing swelling ranks of homeowners who are seriously delinquent buthave yet to lose their homes, and this is threatening a new wave of foreclosures that could hit

just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yetbeen repossessed and put up for sale. Some economists project it could take nearly three yearsbefore all these homes have been put on the market and purchased by new owners. And thenumber of pending foreclosures could grow much bigger over the coming year as moredistressed borrowers become delinquent and then, if they can't obtain mortgage relief, wadethrough the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercuthousing prices, which have increased modestly through December, according to the mostrecent figures in the S&P/Case-Shiller home prices index. That rise partly reflected aslowdown in the flow of foreclosed homes onto the market.

The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of2008 and fell steadily last year, according to a February investor report. But the bank expectsrepossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.

Business inventories were unexpectedly flat in January, while sales rose to their highest levelsince October 2008, government data showed on Friday.The Commerce Department said inventories were unchanged after falling by a revised 0.3

percent in December, previously reported as a 0.2 percent drop.Economists polled by Reuters had expected a 0.2 percent rise in January inventories.


16/19

Inventories are a key component of gross domestic product changes over the business cycleand a sharp slowdown in the pace of inventory liquidation handed the economy its fastestgrowth rate in six years in the fourth quarter.Business sales rose 0.6 percent to $1.05 trillion in January following a 1.0 percent increase in

December. The rise in sales left the inventory-to-sales-ratio, which measures how long itwould take to clear shelves at the current sales pace, at 1.25 months' worth, the lowest since

November 2007.Manufacturers' inventories rose 0.2 percent in January after falling 0.2 percent the priormonth. Inventories at retailers fell 0.1 percent after a 0.2 percent rise in December.Retail motor vehicle and parts inventories rose 0.5 percent after falling 0.3 percent inDecember. Excluding autos, retail inventories fell 0.2 percent in January. Inventories atfurniture, electronic and appliance stores fell 0.3 percent after a 0.2 percent gain the priormonth

BOISE - Idaho may see more budget cuts next year.At the state of the state address back in January, Governor Otter announced the state faced an83 million dollar budget shortfall. To pick up the slack, public areas like schools took massivecuts. Now the state is losing even more money.Idaho has 41 million fewer dollars than Governor Otter projected back in January.

And in an already troubling economic time, that's not a good sign for public institutions.

"The signs are not good. The fact that we're down another 15-million dollars in February inincome tax is not a good sign," said Governor Otter. "We've spent most all the rainy dayfunds. There's no savings like we had last year. We had the opportunity to plug some money

back into the system because we had some savings accounts. We've spent the savingsaccounts."Confidence among U.S. consumers unexpectedly declined for a second month in March, asign Americans are discouraged about the labor market.

The Reuters/University of Michigan preliminary consumer sentiment index fell to 72.5 from

Februarys final reading of 73.6. Economists surveyed by Bloomberg News projected thegauge would increase to 74, according to the median estimate.

Illinois Governor Pat Quinn is the latest Democrat to demand a tax increase, this weekproposing to raise the state's top marginal individual income tax rate to 4% from 3%. He'dbetter hope this works out better than it has for Maryland.

We reported in May that after passing a millionaire surtax nearly one-third of Maryland'smillionaires had gone missing, thus contributing to a decline in state revenues. The politiciansin Annapolis had said they'd collect $106 million by raising its income tax rate on millionairehouseholds to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on

income taxes, the top tax rate with the surcharge now reaches as high as 9.3%fifth highestin the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn'tfled the state.


17/19

Well, the state comptroller's office now has the final tax return data for 2008, the first yearthat the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead oftheir payments increasing by $106 million, they fell by some $257 million.

Yes, a big part of that decline results from the recession that eroded incomes, especially fromcapital gains. But there is also little doubt that some rich people moved out or filed their taxesin other states with lower burdens. One-in-eight millionaires who filed a Maryland tax returnin 2007 filed no return in 2008. Some died, but the others presumably changed their state ofresidence. (Hint to the class warfare crowd: A lot of rich people have two homes.)

Federal Reserve Bank of San Francisco President Janet Yellen is President Barack Obamaspick for vice chairman of the central bank in Washington, two people with knowledge of theselection process said.

The nomination is pending completion of vetting by the Obama administration, one personsaid. The vice chairman gets a four-year term, subject to Senate approval, and a separate termon the Fed Board of Governors. The people spoke on condition of anonymity because theselection hasnt yet been announced.Yellen, 63, would replace Donald Kohn, a 40-year Fed veteran who resigned last weekeffective June 23. Yellen, who served as PresidentBill Clintons chief economist in the 1990s,said last month that the U.S. economy still needs the support of extraordinarily low interestrates. She would gain a permanent vote on monetary policy, instead of having a vote one yearout of every three as a regional Fed chief. [She is a well-known inflationist.]The brazenly bogus unemployment data disseminated to the news media each month by theU.S. Bureau of Labor Statistics appears to have tripped up Colorado. Although the state hadreported a loss of 89,375 non-farm jobs in 2009, the actual number appears to have beenmuch larger 106,300, according to the latest revision. Colorado attributes the discrepancyto the Bureaus rosy estimates of the number of businesses that start and fail each year. Untilthe new numbers came out earlier this week, Colorados official line was that it had somehow

been spared the worst of Great Recessions effects on the labor market. Unofficially, however,the picture was never so bright. I was surprised when they reported the numbers the firsttime, Zoltan Mak, a freight-train conductor on furlough since October, told the Denver Post.I see everybody around me scraping by and having a really hard time. I dont think were

any better off than any other state.

As much could be said of the supposed economic recovery in the U.S. that we keep readingabout but which few workers or businesspeople are able to corroborate. In the Ricks Pickschat room, for one, out of the many hundreds who log on each day, there has been only asingle person who has reported an upswing in business. He lives in the Michigan rust belt, ofall places, and that is why his claims have met with skepticism, to put it mildly. But here inColorado, the notion that recession has been somewhat less severe than elsewhere is flatlycontradicted by a blighted retail landscape that seems to be metastasizing with each passingweek. Entire strip malls and even some larger malls in the Denver area have imploded, and inour own neighborhood, a Sams Club called it quits. At a personal level, nearly everyone we

know with a job or a business is working harder than ever just to stay afloat, and virtuallyeveryone who was in real estate has left the field.
http://search.bloomberg.com/search?q=Janet+Yellen&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Barack+Obama%3Fs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Donald+Kohn&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Donald+Kohn&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Bill+Clinton%3Fs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Bill+Clinton%3Fs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Janet+Yellen&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Barack+Obama%3Fs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Donald+Kohn&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Bill+Clinton%3Fs&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1


18/19

JP Morgan Chase & Co. and Citigroup Inc. helped cause the collapse of Lehman BrothersHolding Inc. by demanding more collateral and changing guarantee agreements, a bankruptcyexaminer said today in a report.

The demands for collateral by Lehmans lenders had direct impact on Lehmans liquidity

pool, said Anton Valukas, the U.S. Trustee-appointed examiner, in a 2,200-page report filedin Manhattan federal court. Lehmans available liquidity is central to the question of whyLehman failed.http://www.bloomberg.com/apps/news?pid=20601110&sid=aH2GbcSnGE9A one-year probe into the collapse of Lehman Brothers found credible evidence that topexecutives, including the former chief Dick Fuld, approved misleading financial statementsand used an accounting gimmick to flatter results.

The long-awaited report by the court-appointed examiner Anton Valukas also said that there

was enough evidence to claim that Ernst & Young, Lehmans auditors, failed to question andchallenge improper or inadequate disclosures in the firms results.

The 2,200-page report found some evidence that JPMorgan Chase and Citigroup might havecontributed to Lehmans slide into bankruptcy in September 2008 by demanding collateralfrom the struggling bank in the run-up to its failure.

Mr. Valukas report could pave the way for legal action by the Lehman estate, which ischarged with recovering as much money as possible for its creditors, and class action lawsuits

by investors who bought Lehmans securities before its collapse.http://www.ft.com/cms/s/0/2e412d50-2d6e-11df-a262-00144feabdc0.htmlThere are other bombshells in Lehman bankruptcy report. Valukas avers that Lehman usedaccounting gimmicks, specifically Repo 105s, to conceal its true financial condition leverage and exposure.

Repo 105 transactions were not used for a business purpose, but instead for an accountingpurpose: to reduce Lehmans publicly reported net leverage and net balance sheet.As set forth more fully below, the Examiner concludes that a fact finder could find thatLehmans failure to disclose its use of Repo 105 transactions to impact its balance sheet at a

time when both the market and senior Lehman management were keenly focused on thereduction of Lehmans firmwide net leverage and balance sheet, and particularly in light ofthe specific volumes at which Lehman undertook Repo 105 transactions at quarterend infourth quarter 2007, first quarter 2008, and second quarter 2008, materially misrepresentedLehmans true financial condition.

A trier of fact could find that Lehmans use of tens of billions of dollars of Repo 105transactions at quarterend in late 2007 and early 2008 rendered the firms financialstatements and related disclosures materially misleading.http://lehmanreport.jenner.com/VOLUME%203.pdf

We have complained for over a decade and a half that there is blatant manipulation of marketsat month end and quarter end to manufacture profits. The practice is pervasive, if notendemic. Yet the Fed, Treasury and other regulators allow this repeated abuse, which
http://www.bloomberg.com/apps/news?pid=20601110&sid=aH2GbcSnGE9http://www.ft.com/cms/s/0/2e412d50-2d6e-11df-a262-00144feabdc0.htmlhttp://lehmanreport.jenner.com/VOLUME%203.pdfhttp://www.bloomberg.com/apps/news?pid=20601110&sid=aH2GbcSnGE9http://www.ft.com/cms/s/0/2e412d50-2d6e-11df-a262-00144feabdc0.htmlhttp://lehmanreport.jenner.com/VOLUME%203.pdf


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conceals earnings and financial conditions for many entities. PS - Derivatives marking-to-model is the biggest abuse in generating bogus profits.

The big question is: What other banks, hedge funds, financial subsidiaries of majorcorporations, insurances companies, etc. are engaged in Repo 105 or similar means to conceal

their finances.

The Fed expanded its balance sheet $2.321B for the week ended on Wed by buying $2.344Bof MBS and $1.5B of agencies.The nascent US recovery could falter because businesses are still reluctant to invest in newequipment and technology, the head of global delivery and logistics company FedEx haswarned.

Business investment went up somewhat in the fourth quarter but is far below what it ought tobe in a cyclical recovery like this, Fred Smith, chairman and chief executive of FedEx, told

the Financial Times... In my opinion, for consumers to spend you have to get businessinvestment up because that is what creates the jobs, Mr. Smith said. I dont think you willsee substantial increases in employment until you see substantial increases in businessinvestment.

To help encourage businesses to start investing again, Mr. Smith has been urging politicians tochange the tax rules on capital expenditures to allow companies to recoup money earlier thanin the past.

Illinois is the leader of the pack when it comes to stupidity. They have a $13 billion budgetdeficit and the moron who is governor, Pat Quinn, says he will only raise taxes 1% foreducation. He will borrow money and let unpaid bills pile up, a true politician that Illinoissurely deserves.There are an additional 7 million homes eligible for foreclosure that have not been foreclosedon. The banks are hiding them. That is a 3 plus year overhang on the market.As we reported long ago, but no one would listen, JP Morgan Chase and Citigroup caused thecollapse of Lehman Bros. by cutting off their loans. We bet there will be no civil or criminalcharges. The Illuminists again devour their own.

On Thursday Citis volume accounted for 20% of NYSE volume and AIG was second, withBank of America third. It is great having some 50% of daily volume in what we considerbankrupt entities.

bob chapman the financial system in america is on the edge of default 14 march 2010

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